Procurement process in business travel
On June 17th, 2014 a press conference organized by RosBusinessConsulting and ABT-ACTE Russia was held in RBC press centre in Moscow. The topic of the conference was the procurement process in business travel.
The first spokesman, Evgeny Elannikov, head of procurement department of EY in Russia and the CIS reminded the participants of the terms used for tenders and purchases. The aim of the tender is to choose a provider with the best quality of goods or services at an optimum price.
A tender is needed in the following circumstances:
1. The current provider has problems with the service quality;
2. There is the need to check whether services provided meet the current market conditions;
3. Sudden market changes caused for example by the financial crisis;
4. Changes in the industry (new legislation).
The winner of the tender has to offer the lowest price, and during the tender procedure the best terms offered are taken into account. Tenders are divided into open (any company can submit its application) and closed (only companies that were chosen beforehand can participate), and if we talk about business travel tenders, they are mostly open.
At the first stage tender commission collects and analyses information on current costs. Then the provider choosing strategy is defined. At the third stage a detailed description of services needed is made and SLA (Service-level agreement) is prepared. After that a provider is chosen and a contract is signed. And finally, at the fifth stage contract execution and service quality are controlled.
Mr Elannikov stressed that the success of a tender depended on transparency of the process, the right preliminary choice of participants and detailed development of weighting ratios — tender provisions that are of primary importance for the company.
Vera Tchelenk, head of BNP Paribas administrative and procurement department, presented her report «Travel policy and procurement strategy. Cost analysis» and gave detailed information on what the term «travel policy» means — it is a complex of regulations that define what is and what is not allowed to employees during their business trips with the aim of cost optimization.
In order to make cost analysis more efficient, Ms Tchelenk suggests using Porter five forces analysis in terms of which five forces that define the level of competition and consequently the attractiveness of running business in the business travel industry are studied.
Travel departments of large companies should automate all purchases to the maximum, because they represent a cycle that does not stop during the year.
As the result of lively discussion the participants came to the conclusion that the problem of choosing a global or a local provider should be settled with due regard to the goals and the prospective benefit of cooperation with a certain provider.
Marianna Uspenskaya, director of strategic purchase, business travel and marketing in Siemens immediately reminded everyone of the need to correctly stipulate all the provisions that will later be included into the agreement with the provider, when you prepare a tender.
The company should set certain limits, and in case they are exceeded a tender is necessary. If the purchase price does not reach a certain limit, it makes no sense holding a tender and the decision may be taken by company management. It considerably decreases the burden for financial departments. But this scheme does not work in case of business travel, because business trip costs will definitely exceed the threshold of insufficient expenses. There should be high liability staff in the company, and the policy of purchases in business travel depends on them.
Ms Uspenskaya noted that the tender commission should provide the suppliers with very detailed and clear information about the company (within the scope of its corporate confidentiality, of course). The service provider must know who he provides services to.
Tatyana Poplavskaya, managing director, director of corporate support department of FC Otkritie JSC, senior vice-president of Otkritie Bank JSC, suggests asking providers a practical question when you have to choose one of them — how they would settle a certain difficult situation that a prospective customer has got into during his business trip. You can often quickly tell by their answer whether a provider is appropriate or not.
Ms Poplavskaya stresses the importance of having a single email for a certain position, and not a person, because the company should be able to communicate with the provider no matter who deals with purchases.
General director of Carlson Wagonlit Travel in Russia Andrey Safrygin offered the participants of the conference his opinion on procurement from a TMC’s point of view: «It would be great if our prospective customers revealed the objective of the tender in its very beginning. We took part in more than 130 tenders last year, 40% of them lasted for about a year and 80% are still open. It is important to set a limit on tender duration in a situation like that ».
Mr Safrygin complained about the fact that many companies did not send tender results to its participants: «Suppose, our terms are not suitable for a certain company, but we are willing to grow, and if they pointed out what exactly was wrong, it would be a great impetus for us to review our offers in order to provide better conditions next time».
Inna Rukhadze, head of procurement department of Accenture pointed out the need for tender statistics — how long business trips usually take, what hotels the company prefers to book (the amount of stars, the distance from the airport etc.), what cities are of interest for business activities of the company, how many hotels should the choice include for a big city. «In my opinion, as for a big city like Moscow, the offer should include 5-6 hotels, that could satisfy the requests of any business traveller», Ms Rukhadze said.
Other aspects attention should be paid to include the possibility to cut costs by excluding breakfasts, including information on free rooms into the proposal, booking cancellation rules, unavailable dates, price difference between the high and the low season.
Ms Rukhadze devoted the second part of her speech to taxi services. When you prepare a tender proposal, you should pay attention to the fact who the owner of the cars is, whether comfort levels differ (business and comfort class), the latest time you can cancel your booking, whether the company has drivers who speak English or any other foreign language. During the discussion the participants of the conference came to the conclusion that discounts for frequent taxi customers would definitely speak in favour of a certain service provider.
Dmitry Saveliev, an independent expert, spoke about implementation (i.e. execution) of the tender agreement. The process can be divided into two parts: contract conclusion and post-tender documentation, and working with providers: qualification, evaluation, risk management.
Post-tender documentation includes:
— Notification of tender results;
— Finalization of contract provisions (this process can take quite a long time);
— Signing the agreement of intent.
Annex of the contract should always include SLA, confidence statement and authorization.
Qualification process includes a number of factors that can be an advantage as well as a disadvantage of a certain provider. For example, if the provider has no financial guarantees and thematic forums in the internet contain a lot of negative opinions about the provider, he can hardly expect to win the tender. On the contrary, positive reviews, a long period of work (5 years and more), all the necessary certificates can distinguish the provider among its competitors.
The evaluation process includes the following KPIs (Key performance indicator):
— Cost optimization;
— SLA implementation;
— Assessment of feedback with a certain customer;
— Assessment of back office feedback;
— Focus on innovation.
And finally, risk management includes:
— Regular market reviews;
— Alternative providers;
— Efficient feedback analysis;
— Monitoring agency’s work.
Irina Kostyukova, Kaspersky Lab, presented her report «Particular aspects of work with implants and outplants. Common mistakes». An implant is a staff member of an agency that provides business travel and visa services who is located in the customer’s office. An outplant, on the contrary, is situated in the agency’s office. There are other forms of work as well: a call centre is provision of customer services from an agency’s office without a lock on a certain person. Online service is a tool of trip booking through global booking systems, the access to which is provided through customized software.
Before you start working with an implant, you should make a careful choice and hold an interview. You should not overestimate the implant’s working capacity. You should develop clear procedures for every situation. And finally, implants should be considered part of the staff team.
The difficulty of working with outplants consists in their remoteness — no one has ever communicated with them personally, i.e. without email, communication means etc. This gap should be closed and you should meet the outplant at least once. It is much more difficult to influence the choice of an outplant than an implant in a situation like that.
The conference «Procurement process in business travel» ended with a panel discussion. The participants discussed the terminology: «24/7» — is it an emergency service or round the clock work of a TMC? The second issue was the fact whether Russian companies were ready for online procurement or not. Then the participants shared their opinions on the neutrality of booking systems, as there is strong adherence to an agency in Russia. Besides, the participants were interested in the availability of several means of transport as well as hotels in one online booking system.
Oleg Abarnikov